INTRODUCTION
Sometimes when bank customers in Nigeria suffer from
fraudulent or unauthorized withdrawal of funds from their bank accounts, they
are told by their banks to report the incident to the Police. For instance, in
the case of IORPUU KELVIN MSUGHTER v. UNITED BANK FOR AFRICA (UBA) PLC, Suit No. MHC/302/18, decided by the Benue
State High Court of Justice, Makurdi, Mr. Iorpuu, while at home received
several debit alerts on his phone. He rushed to make a complaint to the bank
the following day and after about a month the bank informed him that it was
someone that transferred funds from his account and that he should make a
complaint to the Police.
Is it really the duty of the customer to report such cases of fraudulent withdrawals to the Police or that of the bank? In order to
answer this question, it is crucial to briefly examine the nature of the
banker/customer relationship.
THE NATURE OF THE
BANKER/CUSTOMER RELATIONSHIP
The account balance on your bank account is known as a
demand deposit in banking parlance. The deposits are used by the banks to leverage
lending. Many people mistakenly believe that their account balance shows how
much they own. This is not so. Instead, it shows what the bank owes you. You
merely hold a claim on cash. Therefore, bank deposits are actually loans.
Your cash forms the foundation for a banking system that
loans out your account balance with the promise that they will keep some of it
on hand and return all of it if you ask for it. This is called fractional
reserve lending and this is what all banks do.
The old English case of FOLEY v. HILL (1848) established the
legal precedent, for fractional reserve banking. In that case the court held
that:
"Money, when
paid into a bank, ceases altogether to be the money of the principal; it is
then the money of the banker, who is bound to an equivalent by paying a similar
sum to that deposited with him when he is asked for it…The money placed in the
custody of a banker is, to all intents and purposes, the money of the banker,
to do with it as he pleases; he is guilty of no breach of trust in employing
it; he is not answerable to the principal if he puts it into jeopardy, if he
engages in a hazardous speculation; he is not bound to keep it or deal with it
as the property of his principal; but he is, of course, answerable for the
amount, because he has contracted, having received that money, to repay to the
principal, when demanded, a sum equivalent to that paid into his hands."
In the Nigerian case of WEMA BANK PLC v. ALHAJI IDOWU FASASI
SOLARIN OSILARU (2007) 5 iLAW/CA/I/168/2004 it was held Per OKORO, J.C.A. (Pp.
16-17, paras. F-F) that:
“It is now settled
that the relationship between a banker and customer where a bank accepts money
either in current or deposit account from its customer, is a relationship of
debtor and creditor. The relationship is essentially contractual. See Balogun
v. National Bank of Nigeria Ltd (1978) 11 NSCC,35, Afribank Nig Plc v. A.I.
Investment Ltd (2002) 7 NWLR (pt 765), 40. Now, in view of the nature of
relationship between the banker and its customer and of the contract that
exists between them, the customer has neither the “custody” nor “the control”
of monies standing in his credit in an account with the bank. What the customer
has is a contractual right to demand repayment of such monies. See Purification
Tech. Nig. Ltd. v. A.G. Lagos State & 31 0rs (2004) 9 NWLR (pt 879), 665;
Yusuf v. A.C.B. (1981) 1 SC 74, (1981) 12 NSCC 36. It seems to me therefore
that the customer’s monies in the hands of the banker are not in the custody or
under the control of the customer. Such monies remain the property in the
custody and control of the banker, and payable to the customer when a demand is
made. This is so because if anything happens to the money thereafter e.g. theft
of the money, it is the banker and not the customer that bears the loss. Where
the customer makes a demand e.g. by issuing a cheque and the banker refuses to
pay, it is my view that the customer’s cause of action is in damages under
their contractual relationship. See Afribank (Nig) Plc v. A.I. investment Ltd
(supra).”
In a nutshell, when you deposit funds in a bank account,
those funds are no longer yours!
CONCLUSION
Having briefly examined the nature of the relationship
between the bank and the customer it is submitted in conclusion that money in
the bank remains the property of the bank and when there is a case of its theft
through fraudulent withdrawals or unauthorized withdrawals or transfers, the
duty falls on the bank and not the customer, to report such theft or
unauthorized withdrawal/transfer to the Police. More so, that the bank, has
more information and facts regarding the movement of such funds and would
therefore be in a better position to make a complaint to the Police or law
enforcement agencies.
